Via Jo’s blog, I discovered this video by Paddy Hirsch, formerly a corporate finance writer for Standard and Poor’s. He uses champagne glass pyramids to explain collateralised debt obligations (CDOs). The video shows how asset managers created CDOs made up of CDOs. These secondary CDOs were rated as AAA investments by people like Mr Hirsch’s former employer who clearly either didn’t understand them or didn’t look too closely. Poor standards indeed. (Sorry, just couldn’t resist that one.)

These toxic assets were bought by banks who now have no idea how many of the mortgages behind them are likely to default, which is why they are all hoarding their cash and refusing to lend money to anyone.